Correlation Between Vanguard Small-cap and Aristotle Small
Can any of the company-specific risk be diversified away by investing in both Vanguard Small-cap and Aristotle Small at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Vanguard Small-cap and Aristotle Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Small Cap Index and Aristotle Small Cap, you can compare the effects of market volatilities on Vanguard Small-cap and Aristotle Small and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Vanguard Small-cap with a short position of Aristotle Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small-cap and Aristotle Small.
Diversification Opportunities for Vanguard Small-cap and Aristotle Small
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and Aristotle is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Index and Aristotle Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aristotle Small Cap and Vanguard Small-cap is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Vanguard Small Cap Index are associated (or correlated) with Aristotle Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aristotle Small Cap has no effect on the direction of Vanguard Small-cap i.e., Vanguard Small-cap and Aristotle Small go up and down completely randomly.
Pair Corralation between Vanguard Small-cap and Aristotle Small
Assuming the 90 days horizon Vanguard Small Cap Index is expected to generate 0.99 times more return on investment than Aristotle Small. However, Vanguard Small Cap Index is 1.01 times less risky than Aristotle Small. It trades about 0.07 of its potential returns per unit of risk. Aristotle Small Cap is currently generating about 0.02 per unit of risk. If you would invest 8,791 in Vanguard Small Cap Index on August 29, 2024 and sell it today you would earn a total of 3,554 from holding Vanguard Small Cap Index or generate 40.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 31.52% |
| Values | Daily Returns |
Vanguard Small Cap Index vs. Aristotle Small Cap
Performance |
| Timeline |
| Vanguard Small Cap |
| Aristotle Small Cap |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Vanguard Small-cap and Aristotle Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Small-cap and Aristotle Small
The main advantage of trading using opposite Vanguard Small-cap and Aristotle Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small-cap position performs unexpectedly, Aristotle Small can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Aristotle Small will offset losses from the drop in Aristotle Small's long position.| Vanguard Small-cap vs. Vanguard Mid Cap Index | Vanguard Small-cap vs. Vanguard 500 Index | Vanguard Small-cap vs. Vanguard Emerging Markets | Vanguard Small-cap vs. Vanguard Reit Index |
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Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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